The board of directors of DDT Inc. declared a dividend of $0.75 per share payable on Monday, January 28 to shareholders of record as of Monday, January 14. You owned 500 shares of DDT on Wednesday, January 9 when the price was $7.50 per share. Under TSX rules and assuming no taxes and perfect markets, if you sell your 500 shares of DDT on Friday, January 11, what price will you receive, all else the same?

Question

Quizplus · Accepted Answer

Since you sold your shares before the record date (January 14), you will not receive the dividend. Therefore, the price you receive for selling your shares is simply the share price on the day you sold them (January 11) times the number of shares. The share price on January 9 was $7.50, and assuming no price change and perfect markets, it would be the same on January 11. So, the calculation is 500 shares * $7.50 = $3,750. However, the dividend value should be subtracted because the question implies the dividend value might be factored into the selling price due to market expectations, but since you're selling before the ex-dividend date, you're not entitled to the dividend, and the buyer would be. This was a mistake in my explanation; the correct interpretation should be that since you're selling before the ex-dividend date, the price you receive is simply the current market price without any adjustments for the dividend. Therefore, the correct answer is simply the market value of the shares: 500 shares * $7.50 = $3,750. My initial explanation mistakenly considered adjusting the selling price for the dividend, which is incorrect in this context. The correct answer, based on the straightforward calculation of shares times the share price, is indeed $3,750, without needing to adjust for the dividend since it's not relevant to the selling price received before the ex-dividend date.

The Board of Directors of DDT Inc